Bloomberg News

Emerging Stocks Fall to Two-Year Low on European Debt Concern

October 04, 2011

Oct. 4 (Bloomberg) -- Emerging-market stocks fell for a third day, sending the benchmark gauge to a two-year low, amid concern Europe’s debt crisis will worsen.

The MSCI Emerging Markets Index slid 2.5 percent to 831.22 at 4:37 p.m. in New York, the lowest on a closing basis since September 2009. Russia’s Micex Index tumbled 5.7 percent, as all 30 stocks in the gauge dropped. Benchmarks in Brazil and Mexico each declined for the third day. The Hang Seng China Enterprises Index lost 3.6 percent in Hong Kong. South Korea’s Kospi Index sank 3.6 percent after markets were closed yesterday.

German Finance Minister Wolfgang Schaeuble has opposed moves to further scale up the euro rescue fund, damping speculation of a breakthrough in quelling the debt crisis. Italy’s credit rating was cut three levels by Moody’s Investors Service to A2 from Aa2, while Goldman Sachs Group Inc. cut its global growth forecast for this year and next, predicting recessions in Germany and France as the European economy stalls and the risk of a contraction in the U.S. grows.

“Investors are getting worried that the festering debt crisis in Europe is already infecting the global economy,” said Jonathan Ravelas, chief market strategist at Manila-based Banco de Oro Unibank Inc. “The risk has increased that a U.S. slowdown and a deepening European debt crisis could take place simultaneously.”

Russian stocks followed oil and metal prices lower on concern the European debt crisis will erode demand for commodities, the country’s chief export. Coal producer OAO Raspadskaya tumbled 13 percent, the biggest drop on the Micex. OAO Sberbank, Russia’s biggest lender, fell 8.5 percent.

Brazil Stocks

In Sao Paulo, lender Banco Santander Brasil SA and consumer-goods maker Hypermarcas SA led declines for companies that depend on domestic demand. Vale SA, the world’s largest iron-ore producer, followed metals prices lower.

U.S. factory orders declined 0.2 percent in August, after a 2.4 percent gain the prior month, a Commerce Department report showed. Economists surveyed by Bloomberg News had forecast zero growth. Federal Reserve Chairman Ben S. Bernanke said the central bank stands ready to take additional steps to boost U.S. growth and cautioned lawmakers against budget moves that would harm a “sluggish” recovery.

South Africa’s rand gained 2.5 percent versus the U.S. dollar, the best performance among the 25 emerging-market currencies tracked by Bloomberg. Brazil’s real strengthened 1.8 percent while the Mexican peso rose 2.1 percent. Russia’s ruble and India’s rupee each weakened 0.5 percent against the dollar.

Mining Shares

BHP Billiton Ltd., the world’s largest mining group, slid 1.4 percent in South Africa. Anglo American Plc, the mining company that makes up about 9 percent of FTSE/JSE Africa All Share Index in Johannesburg, fell 2.3 percent. South African miners, builders and electricity industry workers started a protest over safety standards, halting mines throughout the country, where more than a 100 mineworkers have died so far this year.

Hyundai Motor Co., South Korea’s biggest automaker, fell 2.8 percent and its affiliate Kia Motors Corp. lost 3.8 percent in Seoul as the companies’ combined U.S. sales rose 14 percent in September from a year ago, below the 20 percent gain that was the average of three estimates compiled by Bloomberg.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose three basis points, or 0.03 percentage point, to 484, according to JPMorgan Chase & Co.’s EMBI Global Index.

--With assistance from Jason Webb in London. Editors: Richard Richtmyer, Brendan Walsh

To contact the reporters on this story: Ian Sayson in Manila at isayson@bloomberg.net; Belinda Cao in Beijing at lcao4@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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